For an Agile transformation to be truly successful all departments within an organisation need to be part of the journey. For finance teams this can be a particular challenge as historically change happens infrequently within finance practices.
Often finance departments are blamed for slowing innovation. In today’s marketplace the ability to pivot and quickly try new ideas has become critical to success. Below, Paul O’Shea, CEO of Kumoco, the management consultancy that specialises in Agile working and cloud consulting, looks at some of the simple steps finance can take to become an enabler of innovation
- Adopt a VC model for funding projects
Finance departments usually do not have a culture of reviewing value generated by projects as they proceed. Typically they engage at the start to approve budgets and at the end of projects to review ROI and manage depreciation. Working in an Agile way requires continual assessment of the value being delivered. This means that projects that are not delivering value can be identified and stopped earlier. Conversely those that are, can be promoted and additional investment assigned.
In practice this means finance departments should be encouraged to adopt a venture capital model. An initial budget should be allocated to kick-start a project, then value delivered is continually measured to trigger further releases of funding.
A finance department usually works to longer-term goals and does not have a culture of reviewing projects as they proceed to make sure what is undertaken is still valid and has not been overtaken by changes in the business or the market in which it operates. However, a more flexible approach is increasingly necessary as the pace of change in economies and markets has never been faster and companies need to be fleet of foot to survive. Finance departments should be encouraged to perhaps adopt a venture capital model, nurturing projects over defined periods of time. They could provide an initial budget to kick-start a project but then continually assess the project’s progress and validity before releasing further funds for subsequent stages to ensure that what is being funded is still relevant and is valuable for the business.
- Embed the finance team in projects
Typically finance departments sit apart from actual project teams.
This is in direct opposition to an Agile way of working, which involves continual assessment and development, to drive efficiencies and ensure projects are on track and are meeting evolving goals. To address this, businesses should consider embedding finance department members in the project team so they have a better understanding of the work being done and the strategy and goals. Finance team members could also benefit from Agile training where they receive an introduction to Agile and to understand its ethos and integrate more effectively with project teams.
- Use a range of metrics to measure value
Assessing value is not easy. A 2017 global survey by the Scrum Alliance showed that for 41% of participants[i], measuring value was their greatest challenge. To help finance departments correctly assess the value of Agile projects to a business there should be regular reassessment, the metrics should be standardised and value should be measured not solely by financial gains but through a range of key performance indicators (KPIs) to have a more holistic view of the benefits of the project on a business.
- Foster an Agile finance function
As well as the above measures, which apply across a business, fostering an Agile approach in finance departments is also a key part of helping to encourage an Agile and lean way of working in an organisation.
Adopting Agile will help finance functions to increase efficiency and speed through simpler data management by accelerating financial processes such as capital expenditures, resource allocations, reporting and analysis, leading to fewer controls and more real-time information. The result is more timely and actionable financial information that allows managers to be more Agile and responsive and avoid problems and recognise opportunities that will help to transform a business. This is supported by the 2017 CFO Indicator Report that found that 36% of CFOs would like their teams to spend less time on report preparation and data collection more time on forecasting and scenario analysis.
Simple techniques could be embraced, such as understanding how Kanban, a process designed to help teams work together more effectively, can help streamline processes and drive efficiencies. It may also be useful for the finance department to have a Kanban board, updated daily, so that everyone can see and understand how and why these tools work.
CFOs and their teams should also monitor and analyse non-financial KPIs, including customer satisfaction, customer relationships and brand reputation, which can be used to make more accurate forecasts, minimise risks and identify new opportunities.
- Training & preparation
Finally, finance departments should also make themselves transformation-ready and educate staff on the key role the finance function plays in helping to develop an Agile ethos in a business focused around developing a strong customer-centric culture, making a company more flexible and able to achieve goals that are rapidly evolving. The truly Agile finance function has the adaptability, skills and nimble effectiveness to help transform businesses of whatever size or sector - and take them to new heights.
Here Chris Labrey, Managing Director UK & Ireland for Econocom talks to Finance Monthly about the management of long term payment models and how they can play a part in the implementation of cyber security measures.
If businesses have learned anything over the past few weeks, it is that the issue of cyber security has never been more important. Despite the severity of the WannaCry incident — which started off affecting numerous NHS trusts across the UK and evolved into something that affected computers in more than 100 countries — it was a stark and much-needed reminder that no business can truly count themselves as safe, no matter the area or industry.
For those working in the legal sector, the unfortunate truth is that they are more vulnerable than most. On a daily basis, lawyers, barristers, solicitors and more are dealing with highly confidential information — the kind of information that is extremely valuable in the eyes of online hackers. If these individuals were able to infiltrate IT systems and seize this data, the consequences of it being leaked could be disastrous.
With this in mind, it is essential that all law firms put sufficient security measures in place, but there are several obstacles that make this process more complicated than many first anticipate. Firstly, the necessary tools for comprehensive protection often require a significant capital expenditure investment, and many firms struggle to pay this without any negative financial repercussions. What’s more, it is not uncommon that this money comes straight from the pockets of the partners, which results in additional strain for those looking to take a proactive stance against the cyber threat.
Even if the majority of firms could afford to pay the considerable one-off payment to protect themselves, they often fail to consider whether they have the sufficient resources to manage and maintain these various tools and systems. Security is not an automated service —it requires staff that are on-hand to monitor and detect any potential vulnerabilities and then decide on the appropriate action to resolve the issue.
However, flexible payment-over-time models represent a solution that makes the process of deploying these security measures much easier — a solution that reflects our 21st century ‘renter society’ sensibilities, and is being realised by security-conscious law firms. Just like many of us pay for our mobile phones or cars in monthly instalments, the legal sector is beginning to reap the many benefits of using such a model to pay for cyber security protection.
Firstly — and perhaps most obviously — the model means there is no need for a large, one-off payment if businesses want to guarantee protection: instead, the cost is divided into smaller, more manageable chunks that are paid over a pre-determined period of time. Suddenly, the financially-induced headaches that many partners and firms suffer from are alleviated, allowing them the freedom to breathe and implement these new measures without any disruption to regular operations.
Payment-over-time models are also extremely valuable thanks to their flexibility. As the cyber threat continues to evolve and hackers devise new ways of infiltrating IT systems, businesses within the legal sector can continually refresh and future-proof their security measures to ensure they are constantly protected. Outdated systems can be swapped out for state-of-the-art replacements, without having to make another potentially crippling capital expenditure investment.
Fast-growing businesses within the legal sector are understandably wary of spending any significant amount of money on IT systems, especially if they find themselves doubling the size of their workforce in 12 months and find that the systems they spent so much money on are no longer sufficient. Payment-over-time models eliminate this problem entirely, as they allow businesses to scale their estate up or down according to specific business needs and requirements. This approach allows businesses to match the investment costs with the business benefits over time.
The threat of cyberattacks is only going to continue to evolve over time, and so the legal sector is left with no choice but to invest in the relevant security measures to protect themselves. If they fail to do so, they risk enormous financial and reputational damage, as well as the obvious loss of any data that is seized in the process. While putting these measures in place might have previously been tough for many law firms, the popularisation of payment-over-time models is the much-needed lifeline that they need to survive during these tough times.
